Hovering over the election, there is a great but largely unspoken dilemma. It affects almost everything any government can hope to do, but it is not one the big political parties want to confront.
It is this: in order to be able to spend public money prudently in the long term, the State has to spend a lot more money in the short term. Bluntly, the government has to continue to fund bad policies even while it engineers a shift to better ones.
This proposition is not easy for voters to hear, but any honest discussion about the use of public resources over the next five years has to confront it.
We have to buy our way out of the bad policies the State has maintained over many decades. Otherwise we will go on throwing good money after bad. Consider three big areas of policy: health, housing and child welfare.
This bad spending is likely to hit more than €1 billion a year. The State should be spending those billions on social housing
Government spending on health was €865 per person in 1996. By 2017, that had more than tripled to €3,364 per person. But in recent years the vast bulk of the increase has gone into acute hospitals – the most expensive part of the system.
Some of this is very well spent (cancer, stroke and cardiac services have improved greatly). But a lot of it just funnels people from relatively cheap but perfectly appropriate levels of care into more costly and less appropriate ones.
Step-down facility
Most people would be much better off being treated in local primary-care centres rather than going to A&E departments. Patients are kept far too long in hospital because they cannot go home or to a less expensive step-down facility.
Our perverse system makes it cheaper for the individual patient to use the most expensive facilities. As an official review put it: “Once a private patient has been admitted to hospital, it is often in his/her financial interest to avoid being discharged back to primary care.
For public patients, the financial incentive is for GPs to refer public patients to other parts of the health system.”
Modest spending now improves the public finances by reducing future costs in healthcare, criminal justice and social welfare and increasing tax revenues
This is a vast waste of public money, but the twist is that we cannot stop it in the long term without spending a lot more public money in the short term. We need more step-down facilities. We need a much bigger and better-funded system of home care.
We need early access to diagnostics and treatment. But, for example, only a third of proposed primary-care centres have been completed and, according to the Comptroller and Auditor General, "If delivery continues at the current rate, it is estimated that it will take at least a further 20 years to develop the full network."
How much money will we waste over those 20 years because we won’t spend money now to build and staff the centres?
Social housing
Likewise with housing. Even leaving aside the misery inflicted by the policy of refusing to build social housing on the necessary scale, it is fiscally perverse.
Instead of creating tangible assets for itself, the State spends our money subsidising rents paid to private landlords by the ever-rising number of people who could not afford them otherwise.
As the official government spending review puts it, the policy in this area has been “a switch from capital investment to current expenditure” – we fork out huge sums every year from the current budget in subsidies because, for ideological reasons, the Government won’t build houses.
Everybody acknowledges that it is vastly cheaper to intervene in the early years of a child's life than it is to pay for the damage later
So the Government spends more than the EU average on housing, but most of it disappears into the black hole of the private market.
This bad spending is likely to hit more than €1 billion a year. The State should be spending those billions on social housing. But again the awkward truth is that there will be a period of some years when the State has to keep spending on the subsidies while it builds the houses.
It cannot just stop the subsides and throw people out on the street – it will have to keep them going while the social houses are being built.
Children and poverty
Then there is the biggest false economy of them all – not spending what it takes to keep children out of poverty. Everybody acknowledges that it is vastly cheaper to intervene in the early years of a child’s life than it is to pay for the damage later.
Analysis by the president’s council of economic advisers in the US in 2014 concluded that “expanding early learning initiatives would provide benefits to society of roughly $8.60 for every $1 spent, about half of which comes from increased earnings for children when they grow up”.
But the problem with all of this is that strict year-by-year budgeting simply doesn’t take it into account. The Government could be spending very wisely and prudently in ways that will make public expenditure more rational and effective – but the figures in those years would show a spike in spending.
It is politically easier – and more in line with the fiscal rules – to keep spending on bad policies than to shift to good ones. Any good government has to have the courage to cut through that knot.